Vamsee Krishna Kundurthi v. Income Tax Officer (International Taxation)-1, Hyderabad

Revenue Authorities have erred in not granting the benefit of the Treaty to the assessee just for the reason that the assessee has not submitted the Tax Residency Certificate from Austria.

Vamsee Krishna Kundurthi v. Income Tax Officer (International Taxation)-1, Hyderabad [2021] 128 taxmann.com 368 (Hyderabad - Trib.)

Brief Facts

The assessee, a Non-resident individual, filed his return of income for the A.Y 2014-15 on 31-7-2014 admitting "Nil" income. on verification of the total income filed by the assessee along with the return of income for the A.Y 2014-15, the Assessing Officer found that the assessee has claimed double taxation relief under section 90 of the I.T. Act and admitted NIL total income but claimed TDS in his return. Return was selected for scrutiny under CASS, the assessee was required to furnish certain information.

The assessee submitted that

• As the assessee has spent less than 60 days in India during the FY, he qualifies as a Non-resident under section 6(1) of the Act.
• The foreign allowance was not offered to tax in India in the return of income as the same was received by him outside India for the services rendered outside India and shall not form part of total income under section 5(2) of the Income-tax Act, 1961.
• Assessee Invoke exemption under Article 15(1) of the India- Austria DTAA. Based on the above, any salary income earned by a tax resident of Austria for services rendered in Austria is taxable only in Austria. In case services have been rendered in India the income for workdays spent in India is taxable India. He submitted he was a tax resident of Austria and an NR in India. Hence not taxable as per article 15(1) of India- Austria DTAA
• He was not being able to produce Austrian TRC as issuance of the same is dependent on the Austria tax authorities.

The Assessing Officer held that

• The assessee could not produce the Tax Residency Certificate of Austria for claiming the Double Taxation relief under section 90
• The assessee has failed to furnish the supporting evidence for receiving the foreign allowances outside India to come under the purview of section 5(2) of the Income-tax Act, 1961
• the assessee has neither produced any bank account outside India to prove any credits received outside India nor any mode of receiving the receipts outside India. Further, the assessee has also failed to prove the receipts that are reflecting in Form -16 are the salary receipts earned outside India within the purview of Article 15(1) of India-Austria DTAA, as there is no evidence of the assessee being a resident of Austria.
• Further the Employer in Form No. 16 has stated that the total TDS was made on the gross salary received by the assessee in India

Conclusion

As per article 15(1) of the India-Austria DTAA, "salaries, wages and other similar remuneration derived by a resident of a contracting state in respect of an employment shall be taxable only in that State unless the employment is exercised in the other contracting state. If the employment is so exercised, such remuneration as is derived therefore may be taxed in that other state." Further, Article 4(1) the India-Austria DTAA defines the term resident as under:

"For the purposes of this convention, the term 'resident of a contracting state' means any person who, under the laws of that state, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that state and any political subdivision or a local authority thereof."

Following conditions are required to be satisfied to claim an exemption under Article 15(1) of the India - Austria DTAA:

1. The person should be a resident of Austria and
2. The salary and other remuneration should be earned in respect of an employment exercised in Austria.

From the facts of the case, it is apparent that the assessee qualifies as a non-resident in India and as a tax resident in Austria. The salary and allowances are earned by the assessee in respect of employment rendered in Austria due to his foreign assignment. Hence, the first two conditions enumerated under Article 15(1) of the India-Austria DTAA stand satisfied. Therefore, the assessee's claim of exemption in regard to his salary income as per the provisions of Article 15(1) of the India- Austria DTAA in the return of income filed by him is appropriate.

A similar point was discussed in:"Sreenivasa Reddy Cheemalamarri v. ITO"

Normally it is a herculean task to obtain certificates from alien countries for compliance with domestic statutory obligations. In such circumstances, the taxpayer cannot be obligated to do an impossible task. Further, it is obvious that where there is a conflict between the Treaty and the Act, the Treaty shall overrule the Act. In the case of the assessee, by virtue of the Treaty, the assessee is liable to tax in Austria for the services rendered in Austria and not in India.